Viacom's Second Largest Shareholder Floats Studio Merger, Says Redstone Is Too "Salacious" for Hollywood

Sumner Redstone and Mario Gabelli - H 2015
Frederick M. Brown/Getty Images; Hal Horowitz/WireImage

"The mind is working but the body is not? At least discuss it. Tell everybody what's going on," Mario Gabelli says of his call for a disclosure on the executive chairman's mental state.

Mario Gabelli, an investor in Viacom since its founding in 1971, today owns the second-largest block of voting shares of the conglomerate controlled by Sumner Redstone, the ailing 92-year-old executive chairman accused by an ex-girlfriend in legal proceedings of being mentally unstable. The drama has caused Gabelli, the founder of GAMCO Investors, to suddenly become a more vocal activist concerning his Viacom investment, and he spoke to The Hollywood Reporter about his motivation.

What exactly are you asking Viacom to do?

That's a great end-zone question. I want a professional football team moved to L.A. (Laughs.) Look you have a lot of background noise and histrionics dealing with this his-her dynamic. Reading the 15-page document — which I published in a tweet and everyone should read — does bring some questions about Sumner's health. I would think a prompt disclosure about an executive chairman is worthwhile, particularly with a guy that has done such a great job creating a great company over the last 40 years.

And Viacom made a statement yesterday, right?

Their governance committee said the guy is mentally competent. It is what it is. The mind is working but the body is not? At least discuss it. Tell everybody what's going on. They accomplished that with a press release yesterday, and I guess I have to take them at face value. What triggered my comment was Manuela Herzer's pleadings, which is all right, we all have to deal with background noise, but Sumner was a little too salacious for anybody, even the Hollywood crowd. It's totally unnecessary and silly.

And people were asking you about Sumner?

When a newspaper put CEO Philippe Dauman into a situation with a cartoon character, I got too many calls from clients. We run about $20 billion in mutual funds, and some of them have had positions in Viacom and CBS for a long time. 

Why do you keep talking about Viacom and not CBS, where Redstone is also executive chairman?

That's a great point, and I'm glad you brought it up. An article in the business section of a newspaper had a Pinocchio nose on Philippe Dauman. That's what got people calling me. Secondly, Viacom in the stock market has had more focus on losing out to cord-cutters with over-the-top services because some of their programming isn't as current as it should be. You don't have that issue at CBS. Also, Dauman is a trustee of National Amusements, which controls CBS and Viacom, and [CBS CEO] Les Moonves is not. I'm not looking at this from the Hollywood factor, I'm looking at the Wall Street dynamics.

So the fact that Viacom stock has fallen so much more than CBS stock weighs into it?

No. That's irrelevant. We've had stocks go from $10 to $80 back to $40 then to $120. ... The problem is, how do you maintain the growth and vitality in a world in which technology is changing the distribution pattern if you don't have the hot content?

And you want some of Paramount sold off to Alibaba?

Are there synergies for merging certain studios? I always thought that Paramount and Columbia Pictures would get together because of their non-U.S. distribution. Independent of that, China is huge and growing, and they only take a certain number of U.S. films a year. Essentially, I'm saying that Jack Ma has talked about Alibaba Pictures — he's interested in content. And he got a handle on Paramount when he partnered on Mission: Impossible 4. So, make an economic value of Paramount and consider taking Alibaba as a partner, where it could take 10 percent or 20 percent or 50 percent. Let Philippe negotiate that. He's a very good negotiator. Essentially, take their money and go find some big-sizzle programming products. It's not complicated. Will he do it? Who knows? 

Any other ideas you want to suggest to Viacom?

Come on, that's my job. I'm not an investment banker, I manage money for clients. We try to make money. We've been doing it for 40 years. Long only. Diversify. Our average fee is 1 percent, and we've compounded at 16 percent for 40 years. I started following the movie industry in the late '60s when I picked up the broadcasters. There were two or three of us who followed it religiously, then Star Wars opened and everybody started following the movie business.

So you were invested in Viacom before it was even called Viacom? Before Sumner Redstone? How much have you made from it?

Yes. Since it was born. I don't track how much I made since then. My clients don't care. They're like anyone else: "Thank you for the history, but what have you done lately?" Meanwhile, the stock is selling at seven times EBITDA, which is not expensive.

So are you a buyer?

Yes. I actually bought a few shares today for $48 and change.

I know you own Viacom, CBS and Netflix — what else in entertainment?

I own 'em all. We've been in Fox for 20 years. We owned Chris-Craft when Fox took 'em over. And we own everything that John Malone has his fingerprints on.